Low-income Intensity During the 1990s: The Role of Economic Growth, Employment Earnings and Social Transfers

All countries look to economic growth to reduce low-income. This paper focuses on the 1990s and assesses the role played by changes in economic growth, employment earnings and government transfers in the patterns of low-income intensity in Canada during the 1990s. We find that low-income intensity was higher in most provinces during the 1990s than during the 1980s (comparing comparable positions in the business cycle). The largest increase was in Ontario. In particular, in spite of the slow economic growth and falling unemployment between 1993 and 1997, low-income intensity continued to rise. Both increases in the low-income rate and the low-income gaps contributed to this higher level. Employment earnings continued to decline among low-income families over the 1990s, contributing to the increase in low-income intensity in central and eastern Canada in particular. This is related in part to the more severe recession of the early 1990s east of Manitoba, and the lack of recovery among poorer families. During the 1990s changes in government transfers did not offset the fall in employment earnings among lower-income families, as they did during the 1980s, resulting in rising low-income intensity. Declining transfer benefits were associated with a rising low-income gap in some provinces, particularly Alberta. The latest data available at the time of writing was 1998. The strong economic growth of 1999 and 2000 will likely have reduced low-income intensity, but it remains to be seen if it falls back to the level of the 1980s cyclical peak.